Growing your business is one of the most talked about, strategised over, strived for and perhaps misunderstood topics around!
It’s been said that any fool can make money but it takes real brains to keep it. The same can be said for growing a business. With some sweat and determination, sales can be increased through simple increases in activity. Simple stuff like networking, flyer drops and even door knocking and cold calling will, in almost all cases, yield results.
And while it may be fairly simple to grow most businesses, it’s the profitable, sustainable growth that is a mystery to many. Too often, business owners grow their top line revenue and neglect their bottom line profits. This also results in the inevitable cashflow squeeze and sadly, many a business failure as a result of insufficient funds for continued operation.
So how do you avoid the ‘growth sucks cash’ problem that plagues so many motivated, fired-up tradies and contractors?
Here are 5 tips on avoiding the paradox of growing yourself out of business:
Know your numbers
Contrary to what some might think, success in business is not a lottery.
There are some fundamentals to running, and managing, a successful business that seriously increase the likelihood of getting the outcomes you want.
Perhaps the most neglected of these is good financial stewardship.
Regular reporting, analysis and interpreting of your financial performance is crucial to making sound decisions in your business.
Decisions about marketing, recruitment, capital and equipment investment, even whether those long business lunches are justified.
They should all be made based on the ‘story’ that your financials tell you.
Knowing which numbers to track and how often and what the business story is they’re telling you is not magic or witchcraft.
It’s a simple skill set that literally anybody can learn if they choose.
Related to, but not the same as, point 1, you need to develop a healthy obsession with measuring everything in your business.
Take a Formula 1 race team as an example.
They spend millions of dollars on telemetry and data gathering sensors and equipment so the engineers, crew and managers can monitor everything to do with the car and the driver’s performance.
Tyre temperatures, air temperatures, braking pressure, time under acceleration, g forces, braking pressure and the list goes on.
All that data is collected and analysed on the fly so adjustments can be made quickly.
Races are won and lost on hundredths of a second so even minute gains need to be found and found quickly.
While your business decisions may not need to be made in split seconds, measuring everything will give you the feedback you need to know if changes you’re making (or not making) are having a positive or negative impact on your performance.
All these ‘scores’ will tell you where to focus your attention.
There’s no point trying to squeeze more horsepower out of the car if where you’re losing time is in the corners under brakes.
You can’t manage what you do not measure…
Park your ego
It’s a fact that trade businesses are male dominated.
It’s also well known that males tend to have quite healthy egos!
Unfortunately, many of us blokes can become a little fired up in business and get addicted to the chase…
Chasing new clients, more work, bigger contracts, higher profile accounts. When we allow our ego to start clouding our decision making and our actions, we run the risk of losing touch with the real reason to grow our business.
Parking our ego and making sales decisions on the numbers, both financial and non-financial, can be hard.
Rest assured though, there will be times throughout your growth when you need to seriously consider saying “no” to a contract or account.
Well in some instances it could be a case of the straw that breaks the camel’s back.
Growth can be a real drain on cashflow and while it may seem like you can never take on too much work, the opposite is in fact true.
Knowing how much is enough is critical to your success and being able to say no is a skill you’ll rely on many times in business!
Plan ahead (and Set budgets and forecasts!).
Expect the best, plan for the worst.
Wise words to live by and especially true in a growing business.
Questions that you need to be asking like:
do you have enough access to capital?
What contingencies are in place for the loss of a key account or staff member?
How many days cashflow do you have in reserve?
What marketing seasons does your business operate under?
Without effective and well thought out plans in place, too many of your business decisions are made from a reactive, fire fighting perspective.
If you’ve ever felt like you’re driving hard and not sure if it’s in the right direction (or worse still, in circles) then chances are you lack a solid action plan.
While this plan should include elements such as marketing, staffing, pricing and more, make sure your business plan has solid budgets and forecasts so you can track your actual performance against expectations.
Just like the F1 team, pushing too hard can stress everything and everyone.
Sometimes to breaking point.
Recruiting takes time.
Training takes time.
Quality will suffer if systems aren’t up to date and team aren’t following them.
Finding the right amount of speed and pressure for your growth takes wisdom, experience and perhaps just a little bit of luck.
One way to reduce the guesswork and increase the confidence level in your growth path is to know your numbers, measure everything, park your ego and plan ahead!
Jokes aside, by following the previous 4 steps you’ll reduce the gut thinking and increase the amount of sound, logic based choices every good captain needs to make.
While nothing in life is certain and this is particularly true in business, by following these simple fundamentals you should find yourself spraying more champagne on the podium instead of the fire extinguisher on those smouldering dreams.